November 13, 2025
The Japanese yen has plunged to a historic low against the euro, driven by Prime Minister Fumio Kishida’s reaffirmation of a gradual approach to interest rate hikes, intensifying pressure on Japan’s currency markets.
Currency Movement:
The yen fell to its lowest level ever against the euro, breaching the 170-yen mark, as traders reacted to signals that Japan’s monetary tightening would remain slow and measured.
Prime Minister’s Remarks:
Kishida emphasized that Japan’s economic recovery remains fragile and that aggressive rate hikes could derail growth. His comments reinforced expectations that the Bank of Japan will maintain its ultra-loose policy stance for the foreseeable future.
Market Reaction:
Investors accelerated yen-funded carry trades, favouring higher-yielding assets in Europe and the U.S. The euro surged as a result, while the yen weakened further despite previous interventions by Japanese authorities.
Historical Context:
The yen has been under sustained pressure since 2022, losing over 20% against the dollar and prompting multiple rounds of intervention. July 2024 saw a 38-year low of 161.96 yen to the dollar, and the current euro exchange marks another milestone.
Policy Outlook:
Japan’s central bank remains cautious, citing subdued inflation and wage growth. Analysts warn that continued divergence from global rate trends could exacerbate currency volatility and raise import costs.
The yen’s slide complicates Japan’s economic outlook, increasing the cost of energy and food imports while boosting export competitiveness. However, prolonged weakness risks undermining consumer confidence and triggering inflationary pressures. The government may face renewed calls for intervention if the currency continues to slide.
(Source – Reuters)
—Agencies
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